A recently released Jadwa Investment report looks at the role that natural gas will play in Saudi Arabia’s Vision 2030 plan to reform its economy and society.
“Saudi Arabia holds the world’s sixth largest proven gas reserves and was the seventh largest producer of gas in 2015. Continued investment in gas has resulted in steadily rising output over the years, with a sizable ramp up in production in the last decade,” Jadwa writes in a note to investors. “Despite this, gas consumption has grown as fast as production. Competing demands, primarily from two sectors, petrochemicals and electricity generation, has meant the Kingdom has consistently consumed all its gas.”
Natural gas production in Saudi Arabia.
“Looking ahead, the pace of growth in Saudi gas demand is not likely to ease. Total electricity consumption will be pushed up by industrial development, in line with the Vision 2030, and rising population levels. Concurrently, the petrochemical sector, identified by the Vision to help increase the Kingdom’s non-oil exports, will see further capacity expansion. Accordingly, we forecast that Saudi Arabia will need to grow gas output by an annual average rate of either 3.7 percent, in the base case scenario, or 6.6 percent, in the high case scenario, in the decade to 2030. We also calculate that the government could save $71 for every barrel of crude oil substituted by a barrel of equivalent of gas in electricity generation in 2030.”
The report also knows that while “a steady supply of gas is expected to come online between now and 2020, the greater challenge in exploiting gas will occur in the decade after. Due to the complicated geology of newer gas fields, the cost of developing such resources is likely to be higher than in the past.”
“Nevertheless, we see the centrality of gas in the Vision 2030, and the unsustainable and costly alternative of using crude oil in electricity generation, as ensuring development is prioritized to meet demand in 2030,” Jadwa Investment writes.
